Report to Congressional Requesters

United States General Accounting Office

GAO

November 2001 WATER

INFRASTRUCTURE

Information on

Federal and State

Financial Assistance

GAO-02-134
Page i GAO-02-134 Financial Assistance for Water Infrastructure

Letter 1

Results in Brief 2

Background 3

Federal Agencies Made $44 Billion Available for Drinking Water

and Wastewater Infrastructure in Fiscal Years 1991 Through

2000 7

States Made $25 Billion Available for Drinking Water and

Wastewater Infrastructure in Fiscal Years 1991 Through 2000 18

Agency Comments 22

Scope and Methodology 22

Appendix I Detailed Information on Federal Investment in

Water Infrastructure 25

Appendix II Detailed Information on State-Sponsored Programs

for Drinking Water and Wastewater Infrastructure 27

Appendix III State Survey Instrument 36

Appendix IV GAO Contacts and Staff Acknowledgments 42

GAO Contacts 42

Staff Acknowledgments 42

Figures

Figure 1: Decaying Drinking Water Pipeline in Philadelphia 5

Figure 2: Financial Assistance for Drinking Water and Wastewater

Infrastructure Provided by EPA, Fiscal Year 1991 Through

Fiscal Year 2000 9

Figure 3: Financial Assistance for Drinking Water and Wastewater

Infrastructure Provided by USDA’s Rural Utilities Service,

Fiscal Year 1991 Through Fiscal Year 2000 11

Figure 4: Financial Assistance for Drinking Water and Wastewater

Infrastructure Provided by HUD, Fiscal Year 1991

Through Fiscal Year 2000 13

Contents
Page ii GAO-02-134 Financial Assistance for Water Infrastructure

Figure 5: Financial Assistance for Drinking Water and Wastewater

Infrastructure Provided by Commerce’s Economic

Development Administration, Fiscal Year 1991 Through

Fiscal Year 2000 14

Figure 6: Financial Assistance for Water and Wastewater

Infrastructure Provided by Other Agencies, Fiscal Year

1991 Through Fiscal Year 2000 17

Figure 7: Primary Sources of Financial Assistance Provided by

States 19

Figure 8: State-Sponsored Grant and Loan Programs 20
Page 1 GAO-02-134 Financial Assistance for Water Infrastructure

November 30, 2001

The Honorable Robert C. Smith

Ranking Minority Member

Committee on Environment

 and Public Works

United States Senate

The Honorable Michael D. Crapo

Ranking Minority Member

Subcommittee on Fisheries,

 Wildlife, and Water

Committee on Environment

 and Public Works

United States Senate

U.S. drinking water and wastewater systems encompass thousands of

treatment facilities, collection facilities, and related works, and well over a

million miles of pipes and conduits. While the investment, made over

decades, in these facilities is enormous, even more funds will be needed in

the future to support efforts to maintain clean and safe water. The

estimated cost of the investments needed to repair, replace, or upgrade

aging facilities, accommodate the nation’s growing population, and meet

new water quality standards ranges from $300 billion to $1 trillion over the

next 20 years, according to various estimates.

While user rates serve as the major source of facilities’ financing, federal

and state government agencies offer financial support as well. As the

agency that regulates drinking water and surface water quality, the U.S.

Environmental Protection Agency (EPA) provides a significant amount of

financial assistance for facilities that supply drinking water and treat

wastewater. This assistance is primarily in the form of grants to the states

to capitalize revolving loan funds. The states, which are required to

contribute matching funds equal to 20 percent of the EPA grants, make

loans to local communities or utilities; as loans are repaid, the states’

revolving loan funds are replenished. In addition, other federal agencies

provide financial assistance for drinking water and wastewater facilities

through a variety of grant and loan programs, some of which also require

matching funds. Some of this assistance goes directly to local communities

or utilities; the rest goes to states that then distribute it to the local level.

In addition, states sponsor their own financial assistance programs for

local drinking water and wastewater facilities. Given the magnitude of the

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-02-134 Financial Assistance for Water Infrastructure

estimated infrastructure needs, some industry groups are seeking

increased federal funding, and the Congress is considering a variety of

legislative options.

In this context, you asked us to develop information on the financial

support that federal agencies and states have historically provided for

water infrastructure improvements. Accordingly, as agreed with your

offices, this report provides information on financial assistance that (1)

federal agencies and (2) states made available for capital improvements at

public and privately owned drinking water and wastewater facilities

during fiscal years 1991 through 2000. We collected data from the nine

federal agencies responsible for the majority of the federal assistance and,

using a detailed questionnaire, surveyed all states to collect information on

state-sponsored programs. Forty-six states responded to our survey; the

nonrespondents were Arizona, Arkansas, Georgia, and Illinois. (A copy of

the survey questions is included in app. III.) We converted the annual

amounts reported by the federal agencies and the states to constant year

2000 dollars. We are also collecting data from publicly and privately

owned water utilities about their capital investment programs, which we

will include in a subsequent report to you.

From fiscal year 1991 through fiscal year 2000, nine federal agencies made

available about $44 billion, in a variety of forms, for drinking water and

wastewater capital improvements. Four agencies—EPA and the

Departments of Agriculture (USDA), Housing and Urban Development

(HUD), and Commerce—accounted for about 98 percent of the total.

Specifically, over the 10-year period:

• EPA provided over $20 billion in grants to states to capitalize their

revolving loan funds, and $4.5 billion in grants for water and

wastewater projects specifically designated in the appropriations

process.

• USDA provided local communities $4.5 billion in grants, $7.1 billion in

loans, and $550 million in loan guarantees. USDA also provided

$376 million in grants for water and wastewater projects specifically

designated in the appropriations process.

• HUD provided $4.4 billion in block grants—some directly to large

communities and others to states for distribution to smaller

communities—to be used for water and wastewater projects. HUD

provided another $39.9 million for specific projects designated in the

appropriations process.

Results in Brief
Page 3 GAO-02-134 Financial Assistance for Water Infrastructure

• Commerce’s Economic Development Administration provided

$1.1 billion in grants to local communities for water and wastewater

infrastructure.

The remaining federal assistance, which totaled about $1.1 billion over the

10 years, was provided by the Appalachian Regional Commission, the

Federal Emergency Management Agency, the Department of the Interior’s

Bureau of Reclamation, the Small Business Administration, and the U.S.

Army Corps of Engineers.

According to our survey responses, state governments made a total of

about $25 billion in state funds available for water infrastructure programs

over the past 10 years. Specifically, the states reported that they

collectively:

• Contributed about $10.1 billion to match EPA’s capitalization grants for

the Drinking Water and Clean Water State Revolving Funds. This

amount consisted of about $3.3 billion from state appropriations or

other state sources, and about $6.8 billion that the states leveraged—

that is, raised through the sale of state-issued bonds backed by the

funds.

• Made about $9.1 billion in grants and loan commitments under

state-sponsored programs, including $3.4 billion through a variety of

grant programs and $5.7 billion in loans. The states reported a total of

56 state-sponsored grant programs, 29 state-sponsored loan programs,

and 35 state-sponsored programs that include grants and/or loans.

• Made another $4.4 billion available for loans by selling general

obligation and revenue bonds (15 states).

In addition, the states reported that they contributed about $1.4 billion

from state appropriations, interest earnings, and other state sources for

purposes, such as matching non-EPA federal funds and financing statedesignated specific drinking water or wastewater projects.

Drinking water infrastructure includes treatment and storage facilities and

distribution systems (pipes and conduits), while wastewater infrastructure

includes sewage collection systems and treatment works. According to

EPA officials, there are some 2 million miles of pipe in drinking water

systems alone. While estimates vary, the amount needed for future capital

investments in water and wastewater infrastructure appears large.

According to EPA’s most recent survey of drinking water systems,

conducted in 1999, the needs are $150.9 billion over 20 years. A 1996

Background
Page 4 GAO-02-134 Financial Assistance for Water Infrastructure

report on a similar EPA survey of wastewater systems identified needs of

$128 billion over 20 years, and a subsequent analysis by EPA estimated an

additional $56 billion to $87 billion to correct existing sanitary sewer

overflow problems. The Water Infrastructure Network, a consortium of

industry, municipal, and nonprofit associations, recently estimated needs

of up to $1 trillion over the next 20 years for drinking water and

wastewater systems combined, when both the capital investment needs

and the cost of financing are considered. The actual future needs will

likely be met by some combination of local, state, and federal funding

sources.

This report is intended to provide information on the amount of federal

financial assistance available for drinking water and wastewater facilities

in local communities. We use the term “made available” to encompass

several forms of federal funding. Because of differences in the programs

and in the ways that federal agencies account for their financial assistance,

the information that best reflected the amounts made available for

drinking water and wastewater facilities was appropriations, obligations,

or expenditures, depending on the agency and the specific program in

question. For example, the data for EPA include appropriated amounts for

the revolving loan fund capitalization grants to the states for each year; the

states may not have loaned the funds (i.e., actually made them available)

to local water systems until after the end of the fiscal year in which they

were appropriated. In contrast, the data for HUD and Commerce consist of

obligated amounts—that is, the amounts of funds allocated by the

agencies to drinking water and wastewater infrastructure projects during

the fiscal year. For these agencies, we report obligations rather than

appropriated amounts because their appropriations are for broader

purposes than drinking water and wastewater. In other cases, the data

consist of expenditures—that is, funds actually expended during the fiscal

year regardless of when they were appropriated or obligated. For the loan

programs of the Small Business Administration and USDA’s Rural Utilities

Service, the amounts reported are the face value of the loans or loan

guarantees that were available to be made for the fiscal year. Because

most of these loans are repaid, the ultimate cost to the federal government

is significantly less than the face value. Further details on the costs of the

loan programs—and the nature and amount of other financial assistance

provided by each agency—are included in the following sections of this

report.
Page 5 GAO-02-134 Financial Assistance for Water Infrastructure

Figure 1: Decaying Drinking Water Pipeline in Philadelphia

Source: Drinking Water Infrastructure Needs Survey Second Report to Congress, U.S. Environmental

Protection Agency (EPA 816-R-01-004, Feb. 2001), p. 40 (Philadelphia Water Department).
Page 6 GAO-02-134 Financial Assistance for Water Infrastructure

The federal government has been providing financial assistance for

wastewater treatment facilities since the enactment of the Federal Water

Pollution Control Act Amendments of 1956, which provided grants to local

governments for constructing treatment facilities, but limited the federal

contribution to 30 percent of eligible construction costs. The Federal

Water Pollution Control Act Amendments of 1972, later designated the

Clean Water Act, increased the federal share of costs to 75 percent.

According to the Congressional Budget Office, federal outlays for

wastewater treatment grants rose 10-fold during the 1970s, reaching a high

$8.4 billion in 1980.1

 Subsequent amendments in 1981 and 1987,

respectively, reduced and then phased out the construction grant program,

replacing it with grants to the states to capitalize state revolving funds. As

a condition of receiving the federal funds, states are required to contribute

to the revolving funds as well. Under the Clean Water State Revolving

Fund program, states provide loans to communities to finance wastewater

treatment works projects as well as other water quality projects. The 1987

law envisioned that loan repayments, by financing future loans, would

allow the state revolving funds to operate without sustained federal

support, and authorized appropriations only through 1994. However, the

Congress has continued to appropriate funds each year since. For each of

the most recent fiscal years—1999, 2000, and 2001—the Congress has

appropriated about $1.3 billion for the revolving loan fund program.

The first major federal legislation on drinking water, enacted in 1974, was

the Safe Drinking Water Act, which required EPA to set standards or

treatment techniques for contaminants that could adversely affect human

health. The Congress amended the act in 1986 to establish deadlines

intended to accelerate EPA’s efforts to set standards for more

contaminants and added a number of other significant requirements to be

met by EPA and public water systems. In part to help local water systems

with the costs of meeting federal standards, the Safe Drinking Water Act

Amendments of 1996 established a Drinking Water State Revolving Fund,

similar to that under the Clean Water Act, which also requires state

contributions. The law authorized appropriations of $9.6 billion through

2003; actual appropriations through fiscal year 2001 have totaled

$4.4 billion.

 1

In constant 1997 dollars. See Budget Options, Congressional Budget Office, February 2001.
Page 7 GAO-02-134 Financial Assistance for Water Infrastructure

From fiscal years 1991 through 2000, nine federal agencies made about

$44 billion available for drinking water and wastewater capital

improvements. Four agencies—EPA, USDA, HUD, and Commerce—

account for about 98 percent of the total. The remaining federal

assistance, which totaled about $1.1 billion over the 10 years, was

provided by the Appalachian Regional Commission, the Federal

Emergency Management Agency, the Department of the Interior’s Bureau

of Reclamation, the Small Business Administration, and the U.S. Army

Corps of Engineers.

Of the nine federal agencies that provided financial assistance for drinking

water and wastewater infrastructure from fiscal years 1991 through 2000,

four of them—EPA, USDA’s Rural Utilities Service, HUD, and Commerce’s

Economic Development Administration—accounted for about 98 percent

of the total. EPA and USDA alone accounted for over 85 percent of the

assistance. Over 82 percent of the total assistance was provided in the

form of grants; the remainder consisted of loans and loan guarantees.

Although the programs differed in terms of eligibility criteria, allowable

uses, and funding priorities, for the most part, the financial assistance was

available to a broad range of entities.

EPA’s financial assistance came primarily in the form of grants to the

states to capitalize the Drinking Water and Clean Water State Revolving

Funds, which are used to finance improvements at local drinking water

and wastewater treatment facilities, respectively.2

 The states lend money

from the funds to local communities or facilities for improvements needed

to comply with the Safe Drinking Water Act or Clean Water Act and to

protect public health or water quality. According to EPA, money invested

in the funds provides about four times the purchasing power over 20 years

compared with what would occur if the money were distributed as grants

because the revolving fund money gets recycled when loans are repaid and

funds then become available for new loans. (See fig. 2 for a breakdown of

EPA’s financial assistance for infrastructure projects during the period

that we reviewed.)

 2

The Clean Water State Revolving Fund may also be used for other water quality

improvement projects, such as nonpoint source pollution control and estuary management,

in addition to wastewater treatment facilities.

Federal Agencies

Made $44 Billion

Available for Drinking

Water and Wastewater

Infrastructure in

Fiscal Years 1991

Through 2000

Four Agencies Account for

About 98 Percent of the

Federal Assistance

EPA Made Available About

$25 Billion in Financial

Assistance
Page 8 GAO-02-134 Financial Assistance for Water Infrastructure

To obtain the capitalization grants, states are required to match 20 percent

of the federal grant money. Under the Drinking Water State Revolving

Fund, EPA regularly updates the allotments to the states based on their

proportional share of the needs identified in EPA’s periodic surveys.

Allotments from the Clean Water State Revolving Fund derive from the

percentages specified in the 1987 amendments to the Clean Water Act. The

percentages were based on several factors, including the states’ respective

wastewater treatment needs, as reflected in EPA’s 1976 and 1980 needs

surveys. Drinking water projects designated as priorities for financial

assistance are those that (1) address the most serious risk to human

health, (2) are necessary to ensure compliance with Safe Drinking Water

Act requirements, and (3) will assist systems most in need on a per

household basis, according to state “affordability” criteria. Under the

Clean Water Act, states have greater flexibility. While the states must

similarly establish a priority ranking system for their projects, they are not

bound to fund these projects in priority order. Decisions on which projects

receive what assistance are based on considerations of the severity of

local water pollution problems and other factors.
Page 9 GAO-02-134 Financial Assistance for Water Infrastructure

Figure 2: Financial Assistance for Drinking Water and Wastewater Infrastructure

Provided by EPA, Fiscal Year 1991 Through Fiscal Year 2000

Legend: SRF = State Revolving Fund

N/A = Not applicable

Notes: The amounts presented in this figure are the appropriated amounts; they have not been

adjusted to account for amounts that states can reserve or “set aside” for other purposes. Under the

Drinking Water State Revolving Fund program, states, at their option, may set aside up to 31 percent

of their annual allotment to implement their drinking water programs and perform related activities,

such as training water system operators. Under the Clean Water State Revolving Fund program,

states may set aside 4 percent of their allotments to administer the program. In addition, in each of

the funds, states may make loans to local communities for non-infrastructure-related projects, such as

land acquisition for source water protection, projects to control nonpoint source pollution, estuary

management, etc. We did not attempt to adjust the appropriated amounts to account for such uses.

Earmarks are grants for water and wastewater projects specifically designated in the appropriations

process.

Source: GAO’s analysis of data provided by EPA (measured in constant year 2000 dollars).

USDA’s Rural Utilities Service3 provides direct loans, loan guarantees, and

grants to construct or improve drinking water, sanitary sewer, solid waste,

and storm drainage facilities in rural communities, as part of the Rural

 3

The Rural Utilities Service was created in 1994 to administer the loan and grant program

that was previously administered by the Rural Development Administration and the

Farmers Home Administration. Both of these offices were abolished when the Rural

Utilities Service was created.

USDA Made Available About

$12.5 Billion in Financial

Assistance
Page 10 GAO-02-134 Financial Assistance for Water Infrastructure

Community Advancement Program. Among other things, the program is

designed to provide basic human amenities, alleviate health hazards, and

promote the orderly growth of rural areas by financing new and improved

rural drinking water and waste disposal facilities. From fiscal year 1991

through fiscal year 2000, USDA provided about $12.5 billion under this

program. (See fig. 3 for a breakdown of USDA’s financial assistance during

the period that we reviewed.)

In general, to be eligible for USDA assistance, a facility must serve a rural

area with a population of 10,000 or less and must be unable to finance its

needs from its own resources or obtain other credit at reasonable rates

and terms. Priority for USDA assistance is given to public entities in areas

with populations of less than 5,500 and requests that involve the

consolidation of small facilities or utilities serving low-income

communities. Grants and loans (or loan guarantees) are made directly to

local entities, including municipalities, counties, or other political

subdivisions of states, nonprofit corporations, such as cooperatives, or

Indian tribes. To obtain grant assistance, the median household income of

the applicant’s service area must fall below the statewide nonmetropolitan

median household income. Grants are limited to amounts required by

applicants to establish reasonable user rates and cannot exceed 75 percent

of eligible project costs. Thus, local grantees must provide matching funds.

For loans and loan guarantees, the allowable loan term is limited to

40 years, the useful life of the facilities, or the maximum allowable term

under state law, whichever is shorter.
Page 11 GAO-02-134 Financial Assistance for Water Infrastructure

Figure 3: Financial Assistance for Drinking Water and Wastewater Infrastructure

Provided by USDA’s Rural Utilities Service, Fiscal Year 1991 Through Fiscal Year

2000

Notes: The amounts presented in this figure are the appropriated amounts, except that we are

reporting the amounts available for loans and loan guarantees in terms of their face values. The

actual cost to the federal government for loans and loan guarantees is significantly lower than the

face value because most loans are repaid. For example, according to the Office of Management and

Budget, the average default rate for the Rural Utilities Service’s direct loans for water and wastewater

disposal over fiscal years 1992 to 2000 was about 16 percent.

Earmarks are grants for water and wastewater projects specifically designated in the appropriations

process.

Source: GAO’s analysis of data provided by USDA (measured in constant year 2000 dollars).

HUD’s Community Development Block Grant program is intended to aid in

the development of viable urban communities. Generally, the program

focuses on community development, and drinking water and wastewater

facility investment is often an integral part of that effort. From fiscal year

1991 through fiscal year 2000, HUD provided over $4 billion in block grants

HUD Made Available More

Than $4 Billion in Financial

Assistance
Page 12 GAO-02-134 Financial Assistance for Water Infrastructure

that were used for drinking water and wastewater projects. In addition to

the block grants, HUD provided $39.9 million in assistance for water and

wastewater projects specifically designated in the appropriations process.

(See fig. 4 for a breakdown of the assistance available from HUD during

the period that we reviewed.)

HUD’s community development block grant program funds are distributed

directly to larger communities, called entitlement communities,4

 as well as

to states for distribution to smaller communities. To determine the amount

of its grants to communities and states, HUD uses formulas that combine

several objective measures of community needs, such as population, the

extent of poverty, the age of the housing stock, and the extent of

overcrowding. To be eligible for funding under the block grant program,

all activities or projects must meet at least one of the program’s designated

national objectives: benefiting low- and moderate-income persons,

preventing or eliminating slums or blight, and addressing particularly

urgent community development needs caused by conditions that pose a

serious and immediate threat to the community’s health or welfare.

 4

HUD defines entitlement communities as central cities of Metropolitan Statistical Areas,

other metropolitan cities with populations of at least 50,000, and qualified urban counties

with populations of at least 200,000 (excluding the population of entitled cities).
Page 13 GAO-02-134 Financial Assistance for Water Infrastructure

Figure 4: Financial Assistance for Drinking Water and Wastewater Infrastructure

Provided by HUD, Fiscal Year 1991 Through Fiscal Year 2000

Notes: Our ability to determine how much financial assistance was provided (or used) specifically for

drinking water and wastewater infrastructure varied depending on the recipient. Consequently, the

amounts presented in this figure represent a combination of appropriated amounts (earmarks),

obligated amounts (state), and expended amounts (entitlement).

Earmarks are grants for water and wastewater projects specifically designated in the appropriations

process.

Source: GAO’s analysis of data provided by HUD (measured in constant year 2000 dollars).

Under its Public Works Program, Commerce’s Economic Development

Administration provides grants to communities in economic decline to

revitalize, expand, and upgrade their physical infrastructure—including

water and sewer facilities. Proposed projects must be located within an

economically distressed area, as defined by the Administration, and must

contribute to the long-term development of the area by creating or

retaining jobs and raising income levels. From fiscal year 1991 through

fiscal year 2000, Commerce provided $1.1 billion in grants to local

communities for drinking water and wastewater projects. (See fig. 5 for a

Commerce Made Available

$1.1 Billion in Financial

Assistance
Page 14 GAO-02-134 Financial Assistance for Water Infrastructure

breakdown of the financial assistance that the Economic Development

Administration provided during the period we reviewed.)

Depending on the recipient, matching funds may be required for Public

Works Program grants. A basic grant covers up to 50 percent of a project’s

total cost. However, projects in severely depressed areas may receive

grants of up to 80 percent of the costs and projects for recognized Indian

tribes may be granted up to 100 percent of the costs. Priority is given to

the projects that assist the nation’s most economically distressed areas,

such as areas with persistently high rates of poverty, previously unserved

distressed areas and applicants, and areas undergoing significant

economic downturns and dislocations.

Figure 5: Financial Assistance for Drinking Water and Wastewater Infrastructure

Provided by Commerce’s Economic Development Administration, Fiscal Year 1991

Through Fiscal Year 2000

Note: The amounts included in this figure are the amounts obligated for drinking water and

wastewater infrastructure projects. The amounts appropriated for the Public Works Program, which

provides financial assistance for a variety of physical infrastructure projects, did not include a specific

amount for water infrastructure.

Source: GAO’s analysis of data provided by Commerce (measured in constant year 2000 dollars).
Page 15 GAO-02-134 Financial Assistance for Water Infrastructure

Programs or activities within the Appalachian Regional Commission, the

Federal Emergency Management Agency, the Department of the Interior’s

Bureau of Reclamation, the Small Business Administration, and U.S. Army

Corps of Engineers provided about $1 billion in financial assistance for

drinking water and wastewater infrastructure over the period we

reviewed. With the exception of the Federal Emergency Management

Agency, these agencies targeted their assistance to specific projects,

geographic areas, or some combination of the two. The specifics of each

program follow:

• The Appalachian Regional Commission provided $271.5 million in

grants for projects under state Appalachian development plans. The

Commission makes grants to states or private nonprofit agencies

within the Appalachian Region. In general, grants are limited to

50 percent of project costs, but can be increased to 80 percent in

designated distressed counties or limited to 30 percent in designated

competitive counties.

• The Federal Emergency Management Agency provided $45.5 million5

for drinking water and wastewater infrastructure under its Hazard

Mitigation Grants program to implement measures that permanently

reduce or eliminate future damages and losses from natural hazards

through safer building practices and improving existing structures.

Eligible recipients include state agencies, local governments, other

public entities, and private nonprofit organizations.

• Interior’s Bureau of Reclamation provided a total of $737.4 million for

water infrastructure projects in 17 Western states. Among the

recipients of these grants were water supply agencies and wastewater

collection and treatment agencies. Under its Water Reclamation and

Reuse Program, the Bureau provides grants to investigate and identify

opportunities for reclamation and reuse of municipal, industrial,

domestic, and agricultural wastewater and for the design and

construction of demonstration and permanent facilities to reclaim and

reuse wastewater. Financial assistance for construction projects may

not exceed 25 percent of project costs up to a maximum of $20 million

 5

During the 10-year period we reviewed, the Federal Emergency Management Agency also

provided $15.8 billion to public entities and certain private nonprofit organizations under

its Public Assistance Grants Program, which is intended to alleviate suffering and hardship

resulting from major disasters or emergencies declared by the President. Over $2 billion of

these grants were used for the permanent restoration of eligible utilities, including gas and

electric utilities as well as drinking water and wastewater systems. Because the agency

could not provide information on how much assistance was used specifically for drinking

water and wastewater utilities, we did not include this program in our report.

Five Other Federal

Agencies Provided Over

$1 Billion in Combined

Federal Assistance
Page 16 GAO-02-134 Financial Assistance for Water Infrastructure

per project. Grants are also available to conduct research on related

topics, such as desalination of wastewater, naturally impaired

groundwater, and surface water reclamation. Funding for studies,

demonstration projects, and research is limited to 50 percent of the

total cost.

• The Small Business Administration guaranteed $27.6 million in loans

under its Small Business Loans Program.6

 In this program, guaranteed

loans are made to small businesses that cannot obtain financing in the

private marketplace, but can demonstrate the ability to repay the

guaranteed loans. Loans can be used to construct, expand, or convert

facilities, including water and wastewater infrastructure.

• The U.S. Army Corps of Engineers provided $23.7 million for drinking

water and wastewater infrastructure during the 10-year period. The

Corps does not have a program that provides financial assistance for

water infrastructure, but its annual appropriations identified and

funded certain project-specific assistance. In general, the Corps

requires a 25-percent matching contribution from recipients.

Figure 6 shows the financial assistance that these five federal agencies

provided over the period that we reviewed.

 6

As noted previously, the face value of loans guaranteed by a federal agency does not

represent the actual cost to the federal government because most loans are repaid.

According to the Office of Management and Budget, the average default rate for the Small

Business Administration’s loan guarantees was less than 1 percent over fiscal years 1992 to

2000.
Page 17 GAO-02-134 Financial Assistance for Water Infrastructure

Figure 6: Financial Assistance for Water and Wastewater Infrastructure Provided by

Other Agencies, Fiscal Year 1991 Through Fiscal Year 2000

Note: Depending on the level at which we were able to identify the amounts provided (or used)

specifically for drinking water and wastewater infrastructure, the amounts presented in this figure

generally represent appropriated, obligated, and expended amounts as follows:

• Appalachian Regional Commission – obligated amounts

• Federal Emergency Management Agency – obligated amounts

• Interior’s Bureau of Reclamation – appropriated amounts

• Small Business Administration – face value of loans guaranteed

• U.S. Army Corps of Engineers – expended amounts

Source: GAO’s analysis of data provided by the five federal agencies (measured in constant year

2000 dollars).
Page 18 GAO-02-134 Financial Assistance for Water Infrastructure

The 46 states that responded to our survey cumulatively made about $25

billion in state funds available to local communities and utilities for

drinking water and wastewater improvements during the period that we

reviewed. Specifically, the states reported that they:

• contributed about $10.1 billion to match EPA’s capitalization grants for

the Drinking Water and Clean Water State Revolving Funds. This

amount consisted of about $3.3 billion from state appropriations or

other state sources, and about $6.8 billion that the states leveraged—

that is, raised through the sale of state-issued bonds backed by the

Funds.

• made about $9.1 billion in grants and loan commitments under statesponsored programs.

• made another $4.4 billion available for loans by selling general

obligation and revenue bonds.

In addition, the states reported that they contributed about $1.4 billion

from state appropriations, interest earnings, and other state sources for

purposes, such as matching non-EPA federal funds and financing statedesignated specific drinking water or wastewater projects.

Figure 7 depicts the financing made available by the states during the

period.

States Made

$25 Billion Available

for Drinking Water

and Wastewater

Infrastructure in

Fiscal Years 1991

Through 2000
Page 19 GAO-02-134 Financial Assistance for Water Infrastructure

Figure 7: Primary Sources of Financial Assistance Provided by States

Source: Survey data reported to GAO by 46 states (measured in constant year 2000 dollars).

As noted previously, states are required to match 20 percent of the

revolving loan fund capitalization grants they receive from EPA. States, at

their option, may contribute more than the required minimum. According

to the responses to our survey, the 46 states collectively provided about

$10.1 billion in matching funds for the two revolving loan fund programs.

Forty-two of the states reported amounts that exceeded the 20 percent

minimum matching amount for one or both of the programs.

The states reported that about $3.3 billion of their contributions came

from state appropriations or other sources. In addition, 19 states reported

that they had generated about $6.8 billion to be used for drinking water

and wastewater infrastructure, in bond revenues backed by the state

revolving loan funds. In total, states’ contributions to the Drinking Water

and Clean Water State Revolving Funds accounted for about $10.1 billion

of the total $25 billion that the states reported making available.

States Contributed About

$10.1 Billion to the

Revolving Loan Funds
Page 20 GAO-02-134 Financial Assistance for Water Infrastructure

Unlike federal agencies, which provided assistance mostly in the form of

grants, states provided more financial assistance for water infrastructure

in the form of loans—$5.7 billion versus $3.4 billion for grants. The states

reported a total of 56 state-sponsored grant programs, 29 state-sponsored

loan programs, and 35 state-sponsored programs that include loans and/or

grants. (Detailed information that the states provided on their programs

can be found in app. II.) Figure 8 shows the amount of state grant and loan

programs over the 10-year period.

Figure 8: State-Sponsored Grant and Loan Programs

Source: Survey data reported to GAO by 46 states (measured in constant year 2000 dollars).

States provided funds through a variety of grant programs. Drinking water

facilities received $767 million, wastewater facilities received $2.0 billion,

and grant programs that funded both drinking water and wastewater

projects received $585 million. There were 56 state-sponsored grant

programs for drinking water and/or wastewater infrastructure. For

example:

States Made $9.1 Billion in

Grants and Loan

Commitments Under

State-Sponsored Programs

State-Sponsored Grant

Programs
Page 21 GAO-02-134 Financial Assistance for Water Infrastructure

• Alaska offered municipal construction grants that provided engineering

assistance for water and sewer projects.

• Connecticut offered grants of 20 to 50 percent of the costs for nitrogen

removal through its Clean Water Fund.

• Maine offered grants to help financially stressed communities replace

and upgrade wastewater treatment facilities.

• Minnesota offered special infrastructure grants to construct

phosphorus removal facilities.

• Missouri provided special infrastructure grants for water and sewer

improvements in its state parks.

States responding to our survey indicated that, apart from the state

revolving loan program, they made loan commitments of about $5.7 billion

under state-sponsored loan programs to help meet drinking water and

wastewater facility needs. The states committed $3.9 billion under

programs specifically targeted at wastewater or drinking water facilities.

In addition, states committed $1.8 billion under other state-sponsored

programs in which drinking water or wastewater infrastructure was

among the types of projects eligible for funding.

Twenty-nine states reported having state loan programs that covered a

variety of specific purposes. For example:

• Delaware offered low-interest loans to wastewater and water utilities

to expand and upgrade wastewater and drinking water infrastructure.

• Mississippi offered emergency loans for making necessary repairs to

existing water pollution control systems, or drinking water systems,

and offered loans to finance capital improvements such as water,

sewer, and access roads; to fund improvements needed to implement

projects by private companies; and to promote economic growth.

• Ohio offered loans for emergency remediation threats for drinking

water and preliminary engineering plans and other costs associated

with wastewater and publicly owned drinking water facilities. The state

also provided interest-free loans to pay a portion of sewer or drinking

water line extension project costs, which would otherwise have been

paid by assessments on agricultural land.

• Tennessee offered loans to cities and utility districts that must relocate

utilities because of road projects.

State-Sponsored Loan

Programs
Page 22 GAO-02-134 Financial Assistance for Water Infrastructure

The states reported making available about $4.4 billion for loans from

revenues stemming from general obligation and state revenue bonds.

Fifteen of the 46 states reported using bond issues, including $3.3 billion in

state revenue bonds and $1.1 billion in general obligation bonds. There

were nine wastewater bond programs, eight drinking water bond

programs, and seven bond programs that covered both wastewater and

drinking water projects. For example:

• Virginia’s Resource Authority program issues bonds to provide

financing to local government for wastewater and drinking water

projects.

• Texas’ Water Development Fund funds a variety of regional water

supply, wastewater, and flood control projects through general

obligation funds.

We provided a draft of this report to EPA for its review and comment. We

received comments from several senior officials within EPA’s Office of

Water, including the Director, Drinking Water Protection Division, Office

of Ground Water and Drinking Water; and the Director, Municipal Support

Division, Office of Wastewater Management. They generally agreed with

the report’s findings, but suggested that we present the 10-year summary

of federal and state financial assistance in constant dollars, rather than

current dollars. We originally presented the data in current dollars

because (1) the data include a mixture of appropriations, obligations, and

expenditures and (2) our primary purpose is to present aggregate data, not

trends. However, for greater comparability among the annual figures, we

adjusted the financial assistance data to constant dollars. EPA also

provided us with technical corrections and clarifications, which we

incorporated in the report as appropriate.

To identify the federal departments and agencies that provide financial

assistance for water and wastewater infrastructure, we reviewed the

literature, documents, program information, and past reports that address

infrastructure assistance. We identified nine departments and agencies

that provide financial assistance for water and wastewater infrastructure,

including EPA, USDA, HUD, Commerce, the Appalachian Regional

Commission, the Federal Emergency Management Agency, the

Department of Interior, the Small Business Administration, and the U.S.

Army Corps of Engineers. We asked officials at these departments and

agencies for data on the amount of financial assistance provided for

drinking water and wastewater infrastructure for fiscal years 1991 through

2000. We contacted officials to clarify any questions about the data and to

States Made Another

$4.4 Billion Available for

Loans Through State Bond

Issues

Agency Comments

Scope and

Methodology
Page 23 GAO-02-134 Financial Assistance for Water Infrastructure

obtain additional information as needed. Where possible, we verified the

information we obtained with data from other, independent sources.

To identify the amounts and sources of state funds, we mailed a survey to

all 50 states asking for information on their financial contributions to

drinking water and wastewater capital improvements and on their

state-sponsored programs. Prior to designing the survey, we spoke to

officials from industry associations, EPA, as well as the U.S. Bureau of the

Census to determine the data available from other sources. In developing

the survey we talked with officials from EPA, and pre-tested the survey in

several states. We directed this survey to officials from state offices

responsible for the Clean Water State Revolving Fund, and asked them to

coordinate with other state officials to complete the survey. We received

responses from 46 states.

To check the reliability of the state data, we called states to clarify any

data items that appeared to be questionable or inconsistent. In addition,

we compared the annual amounts that the states reported as contributions

to their Clean Water and Drinking Water State Revolving Funds with

similar data available from EPA’s National Information Management

System database. While we did not independently verify the accuracy or

reliability of EPA’s data, we noted that some of the annual amounts

differed between the two sources. In total, the states reported to us

contributions totaling about 20 percent less to the Clean Water State

Revolving Fund and about 20 percent more to the Drinking Water State

Revolving Fund than indicated by the data in EPA’s information system.

Because GAO’s survey data stemmed from only 46 states while EPA’s data

included all 50 states as well as Puerto Rico, some differences in the data

were expected.

We sorted our data by the state fiscal year, and report annual figures and

cumulative totals in that manner. Finally, we present 10-year summary

data on federal and state financial assistance in constant year 2000 dollars.

We used the GDP chain type price index to adjust for inflation. A copy of

our survey is included in appendix III of this report.

We conducted this review from January 2001 through November 2001 in

accordance with generally accepted government auditing standards.

As we agreed with your office, unless you announce its contents earlier,

we plan no further distribution of it until 30 days from the date of this

letter. We will then send copies to the Administrator, EPA, and make

copies available to others who request them. If you or your staff have
Page 24 GAO-02-134 Financial Assistance for Water Infrastructure

questions about this report, please call me on (202) 512-3168. Key

contributors to this report are listed in appendix IV.

David G. Wood

Director, Natural Resources

 and Environment
Appendix I: Detailed Information on Federal

Investment in Water Infrastructure

Page 25 GAO-02-134 Financial Assistance for Water Infrastructure

Dollars in millions (in constant year 2000 dollars)

Type of

assistance 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total

Environmental Protection Agency

Clean Water SRF Grant 2,047.8 1,948.5 1,927.5 1,218.0 1,235.2 2,073.5 625.0 1,350.0 1,350.0 1,350.0 15,125.5

Drinking Water

SRF

Grant 0 0 0 0 0 0 1,275.0 725.0 775.0 820.0 3,595

Earmarks Grant 15.7 435.0 556.0 558.0 834.3 306.5 301.0 393.1 381.8 411.7 4,193.0

Total 2,063.5 2,383.5 2,483.5 1,776.0 2,069.5 2,380.0 2,201.0 2,468.1 2,506.8 2,581.7 22,913.5

USDA – Rural Utilities Service

Water and

Wastewater Loans

Loan 500.0 635.5 825.0 675.5 827.9 471.5 664.5 616.0 631.1 704.8 6,551.8

Water and

Wastewater Loan

Guarantees

Loan

Guarantee

35.0 35.0 35.0 35.2 0 75.0 75.0 75.0 75.0 75.0 515.2

Water and

Wastewater Grants

Grant 300.0 375.6 420.8 500.0 462.6 364.9 459.2 435.9 422.9 366.4 4,108.2

Earmarks Grant 0 0 25.0 40.0 37.4 34.7 35.8 53.7 43.9 86.7 357.3

Total 835.0 1,046.1 1,305.8 1,250.7 1,327.9 946.1 1,234.5 1,180.6 1,172.9 1,232.9 11,532.5

Department of Housing and Urban Development

Water & Sewer

Activities –

Entitlement

Grant 71.0 59.0 69.0 53.8 55.9 39.6 60.9 53.1 43.3 45.4 550.9

Water & Sewer

Activities – State

Grant 309.8 325.1 371.2 415.0 429.2 409.1 309.6 225.3 331.2 368.0 3,493.6

Earmarks Grant 0 6.1 8.4 0 4.7 0 0 1.6 4.6 11.8 37.2

Total 380.8 390.2 448.6 468.8 489.8 448.7 370.5 280.0 379.2 425.2 4,081.7

Commerce – Economic Development Administration

Water Grant 19.8 25.5 24.7 28.3 41.8 30.1 25.6 41.7 33.9 33.7 305.1

Sewer Grant 52.7 50.6 45.1 89.8 74.8 74.3 57.0 84.8 78.2 72.8 679.9

Total 72.5 76.0 69.8 118.1 116.6 104.3 82.6 126.4 112.1 106.5 985.0

Interior – Bureau of Reclamation

Reclamation

Wastewater and

Groundwater

Studies

Grant 0 0 0.2 9.5 15.6 22.8 38.1 46.0 34.8 33.2 200.1

Rural & Indian

Water Systems

Grant 0 0 35.1 36.3 51.5 33.0 66.1 58.7 68.3 64.9 413.9

Earmarks Grant 0 0 0 10.0 3.0 30.9 1.5 19.3 11.3 11.2 87.2

Total 0 0 35.3 55.8 70.1 86.7 105.7 123.9 114.4 109.2 701.1

Appalachian Regional Commission

Sewer Systems Grant 5.6 7.3 9.1 10.2 10.9 8.0 6.9 12.0 9.5 9.1 88.5

Water Systems Grant 10.5 9.8 11.7 19.8 15.0 11.6 17.6 15.1 14.3 11.1 136.5

Water and Sewer

Systems

Grant 1.1 1.6 0.4 7.1 4.8 0.9 1.9 2.0 3.1 2.5 25.6

Total 17.2 18.7 21.2 37.2 30.6 20.5 26.5 29.2 26.9 22.8 250.6

Federal Emergency Management Agency

Mitigation and

Planning

Grant 0 0.3 0.5 3.3 2.0 1.2 4.9 11.6 16.6 3.1 43.6

Appendix I: Detailed Information on Federal

Investment in Water Infrastructure
Appendix I: Detailed Information on Federal

Investment in Water Infrastructure

Page 26 GAO-02-134 Financial Assistance for Water Infrastructure

Dollars in millions (in constant year 2000 dollars)

Type of

assistance 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total

Small Business Administration

Sewerage Systems Loan

Guarantee

0.8 0.3 0.4 0.5 0.6 0.2 1.6 0.2 0.4 1.0 5.8

Water Supply Loan

Guarantee

1.4 1.6 1.9 2.2 1.0 2.2 2.1 3.1 2.8 1.6 19.8

Total 2.1 1.9 2.3 2.7 1.6 2.4 3.7 3.3 3.1 2.5 25.6

U.S. Army Corps of Engineers

Environmental

Infrastructure

Grant

0 0 0 0 0 0 0 0 9.7 13.8 23.5

Total federal

assistance $3,371.1 $3,916.7 $4,366.9 $3,712.6 $4,108.1 $3,990.0 $4,029.3 $4,223.1 $4,341.7 $4,497.6 $40,557.2

Legend: SRF = State Revolving Fund

Notes: This table is intended to provide information on the amount of federal financial assistance

available for drinking water and wastewater facilities in local communities. The term “made available”

encompasses several measures of federal funding. Because of differences in the programs and in the

ways that federal agencies account for their financial assistance, it was not possible to obtain

consistent information. For example, the data for EPA are appropriated amounts. In contrast, the data

for Commerce are obligated amounts because their appropriations are for broader purposes than

drinking water and wastewater. In other cases, the data consist of expenditures. For the loan

programs of the Small Business Administration and the USDA’s Rural Utilities Service, the amounts

reported are the face value of the loans and loan guarantees available for the fiscal year.

Earmarks are grants for water and wastewater projects specifically designated in the appropriations

process.

Depending on the level at which we were able to identify the amounts provided (or used) specifically

for drinking water and wastewater infrastructure, the amounts presented in this figure generally

represent appropriated, obligated, and expended amounts as follows:

EPA – appropriated amounts

USDA’s Rural Utilities Service - appropriated amounts except that the amounts for loans and

loan guarantees represent the face value. (Because most of the loans are repaid, the actual

federal outlay is significantly less than the face value.)

HUD – obligated amounts for grants to entitlement communities and expended amounts for

grants to states and designated projects

Commerce’s Economic Development Administration – obligated amounts

Appalachian Regional Commission – obligated amounts

Federal Emergency Management Agency - obligated amounts

Interior’s Bureau of Reclamation – appropriated amounts

Small Business Administration – face value of the guaranteed loans

U.S. Army Corps of Engineers – expended amounts
Appendix II: Detailed Information on

State-Sponsored Programs for Drinking Water

and Wastewater Infrastructure

Page 27 GAO-02-134 Financial Assistance for Water Infrastructure

State

Form(s) of

assistance

Targeted

system(s) Program name Purpose

AK Grants DW,WW Municipal Construction

Grants

To provide partial grants and engineering assistance to larger

communities for water and sewer projects.

AK Grants DW,WW Village Safe Water To improve sanitation conditions in rural and native Alaska

villages through planning and construction grants and

engineering/technical assistance. Alaska's Village Safe

Water Program, in existence since the early 1970s, offers

assistance to community systems that provide piped or hall

services.

AK Grants DW,WW Supplemental Housing

Development Grant

Program

To assist regional housing authorities in supplementing housing

projects that have been approved for development with HUD

Indian Housing Development Funds. Grants are limited to 20

percent of HUD's total development cost per project and can

only be used for (1) the cost of on-site water and sewer facilities;

(2) the construction of roads to project sites; (3) electrical

distribution facilities; and (4) energy-efficient housing design

features. Supplements are needed to offset the higher costs for

materials in Alaska.

CA Loans DW Water Conservation,

Groundwater Recharge &

New Local Water Supply

Program

Provide assistance to local agencies in the acquisition and

construction of water conservation and groundwater recharge

projects, development of new local water supplies, and

infrastructure, and reliability projects.

CA Bonds DW Safe Drinking Water Bond

Law Program

To correct domestic water system deficiencies to enable

systems to meet drinking water standards mandated under the

California Safe Drinking Water Act.

CA Grants DW Drinking Water Treatment &

Research Fund

Provide funding to public water systems facing financial

hardship due to the cost of treatment or source replacements of

their water sources.

CA Loans WW State Water Quality Control

Fund

To provide construction loans for wastewater construction to

assist agencies in financial hardship.

CA Grants/loans WW Water Recycling

Construction Program

To provide grant and loan funding to municipalities for design

and construction of projects to recycle water.

CA Grants WW Small Communities Grant

Program

To provide grants for planning redesigning and constructing

wastewater facilities in small communities.

CO Loans DW/WW Small Water Resources

Projects Program

The financing program for the small water resources projects

(SWRP) provides an economical source of capital for expansion

and rehabilitation of existing public water systems in Colorado.

Under this program the authority provides loans that appreciably

lower the costs of borrowing for those municipal governments

and special districts having a population greater than 1,000 or a

customer base of at lease 650 taps. Loan amounts can range

from $300,000 to $25,000,000. Individual construction loans up

to $25,000,000 do not require approval from the general

assembly (as do other authority water supply loans greater than

$25,000,000). These loans are fully insured by a private bond

insurance company and are issued without using the moral

obligation of the state. The SWRP is funded solely by the

authority.

CO Loans DW Colorado Water

Conservation Board

Construction Fund Loan

Program

To provide loans to construct or rehabilitate raw water

infrastructure such as dams, diversion structures, wells,

raw water pipelines, ditches, and canals. The purchase of water

rights and land can be financed as part of the project.

Appendix II: Detailed Information on

State-Sponsored Programs for Drinking

Water and Wastewater Infrastructure
Appendix II: Detailed Information on

State-Sponsored Programs for Drinking Water

and Wastewater Infrastructure

Page 28 GAO-02-134 Financial Assistance for Water Infrastructure

State

Form(s) of

assistance

Targeted

system(s) Program name Purpose

CO Grants/loans DW/WW Energy Impact Assistance

Fund

To assist political subdivisions of the state of Colorado that are

socially or economically impacted by the development

processing and energy conversion of minerals and mineral

fuels.

CO Grants DW Drinking Water Grant

Program (Administered By

Colorado Department of

Public Health and

Environment

To provide assistance for planning design and construction of

eligible drinking water treatment and distribution system

projects. Serving 5,000 or less population

CO Grants WW Domestic Wastewater

Treatment Grant Program

Provide financial assistance to governmental agencies for

planning design and construction of eligible wastewater projects.

Serving 5,000 or less population

CO Loans DW Drinking Water State Direct

Loan Program

To provide loans to small domestic drinking water systems

before the federal law was finalized; served as an interim

program.

CT Grants DW Potable Water Program To correct water supply problems in wells contaminated by

industrial wastes program. The program no longer requires

matching funds.

CT Grants DW,WW Special Acts Of The

Legislature

To provide infrastructure grants.

CT Grants/loans WW Clean Water Fund To provide grants for the removal of nitrogen from wastewater.

Grants of 20, 30, and 50 percent for all, nitrogen removal and

CSO, respectively.

DE Grants/loans DW,WW Delaware 21st Century

Infra-Structure Investment

Fund

To provide low-interest loans and/or grants to wastewater and

water utilities for infrastructure expansion and upgrades.

FL Grants DW Water Supply Restoration To restore or replace contaminated private drinking water wells

often by installing a connection to a public water system.

Transmission and distribution lines needed to bring public water

system to areas not previously served are also covered.

Approximately half of the annual $4 million budget is used to

install transmission and distribution lines.

ID Grants/loans DW Idaho Water Resource

Board—Water Resource

Funding Program

To construct and financially assist the water projects, including

the rehabilitation, improvement or extension of existing systems

or facilities.

ID Grants WW Wastewater Treatment

Facility Grant Program—

Idaho Dept. Of

Environmental Quality

To provide financial assistance to qualifying entities for the

construction of wastewater treatment facilities.

KY Grants DW,WW Surplus Expenditure Plan To assist community development projects ranging from park

projects to water and sewer projects.

KY Grants DW,WW State Surplus And 502

Grant Program -

To assist community development projects for water and

wastewater.

KY Grants Legislature

Directs

Community Development

Projects

To address legislative directives.
Appendix II: Detailed Information on

State-Sponsored Programs for Drinking Water

and Wastewater Infrastructure

Page 29 GAO-02-134 Financial Assistance for Water Infrastructure

State

Form(s) of

assistance

Targeted

system(s) Program name Purpose

LA Loans (from

bond pool)

DW,WW La Community

Development Authority

To provide economic development infrastructure and

environmental facilities to political subdivisions.

MA Grants DW Grandfathered Drinking

Water Treatment Plants

To provide debt service reimbursement to communities that

constructed drinking water treatment plants before the creation

of the drinking water SRF program. State provides 50 percent

reimbursement of principal portion of debt service payment for a

10-year period.

MD Grants WW Biological Nutrient Removal

(BNR) Program

To help local governments upgrade wastewater treatment plants

with BNR-advanced treatment. Funds are provided under a

50/50 cost-share agreement as part of the Chesapeake Bay

nutrient reduction strategy.

MD Grants WW Supplemental Assistance

(Sewerage) Program

To help local governments upgrade wastewater infrastructure.

Funds are provided for priority sewerage projects needed to

address public health/water quality problems in financially

disadvantaged communities.

MD Grants DW Water Supply Program To provide state grant funds to assist local governments in

upgrading their drinking water infrastructure. Funds are provided

for priority drinking water projects that address the public health

problems in financially disadvantaged communities.

ME Grants WW State Grant Program To help financially stressed communities replace and upgrade

wastewater treatment facilities.

ME Grants WW Small Community Grant

Program

To help towns replace the malfunctioning subsurface disposed

systems that pollute water bodies or create a public nuisance.

MI Grants WW Hardship Grants Program To help unsewered communities to construct wastewater

collection and treatment systems.

MN Grants WW State Independent Grants

Program

To fund municipal wastewater treatment facilities. This program

is no longer in effect.

MN Grants WW Combined Sewer Overflow

Grants Program

To provide grants to metro area municipalities for sewer

separation program. Program is no longer in effect.

MN Grants WW Wastewater Infrastructure

Fund

To provide supplemental grant assistance to hardship

communities augmenting available CWSRF loans and USDA

rural development funds.

MO Grants/loans WW 15 percent

State Grant/Loan

To make funds available to wastewater SRF loan recipients at

15 percent of eligible costs.

MO Grants/loans WW 37(H) Storm Water Grants

and Loans

No description given.

MO Grants WW Storm Water Grants 37 (E) No description given.

MO Grants WW Special Infrastructure

Grant—Phosphorus

To build phosphorus removal facilities and appurtenances in the

Table Rock Lake watershed.

MO Grants/loans DW,WW 37(G) New Rural Water—

Sewer Grants and Loans

No description given.

MO Grants DW,WW Special Infrastructure

Grant—State Parks

To provide water and sewer improvements at Missouri's state

parks.

MO Grants WW 40 percent

Construction Grant

To assist municipalities, counties, public water and sewer

districts, political subdivisions or instrumentalities of the state in

the planning, design, and construction of wastewater systems.

MO Loans WW Direct Loans To assist municipalities, counties, public water and sewer

districts, political subdivisions or instrumentalities of the

state in the planning, design, and construction of wastewater

systems.
Appendix II: Detailed Information on

State-Sponsored Programs for Drinking Water

and Wastewater Infrastructure

Page 30 GAO-02-134 Financial Assistance for Water Infrastructure

State

Form(s) of

assistance

Targeted

system(s) Program name Purpose

MO Grants DW,WW 37 (E) Old Rural Water and

Sewer Grants

To enhance the state's water quality.

MO Grants WW Federal Hardship State

Match

To assist disadvantaged communities with planning, designing,

and building wastewater systems.

MO Grants WW State Hardship To assist disadvantaged communities with planning, designing,

and building wastewater systems.

MO Grants WW Industrial Development

Grant

No description given.

MS Loans DW Drinking Water Systems

Emergency Loan Fund

(DWSELF)

To make emergency loans to eligible applicants: (1) to make

necessary repairs to existing drinking water systems to meet the

emergency; (2) to complete construction needed to provide a

permanent correction to the problems that caused the

emergency; (3) to cover reasonable administration costs of the

DWSRF program and/or the federal DWSRF program, and

conducting activities under the local governments and rural

water systems improvements revolving loan program act; and

(4) to earn interest on fund accounts.

MS Grants/loans WW Development Infrastructure

Program

To help counties or cities finance small infrastructure projects to

promote economic growth.

MS Loans DW,WW Capital Improvements

Revolving Loan Program

(Cap)

To provide low-interest loans to counties and municipalities for

capital improvements, such as water, sewer, and access roads.

MS Loans WW Water Pollution Control

Emergency Loan Fund

To make loans to eligible applicants for emergency projects for

the purpose of making necessary repairs to existing water

pollution control systems to meet the emergency.

MS Loans DW,WW Mississippi Business

Investment Act Program

To offer low-interest loans to counties or incorporated cities to

finance improvements necessary to implement private company

investments.

MT Grants/loans DW,WW Renewable Resource Grant

and Loan Program

To provide funding for the planning, design, and construction of

renewable resource projects.

MT Grants/loans DW,WW Treasure State Endowment

Program

To help solve serious health and safety problems and to assist

communities with the financing of public facilities projects,

including the construction or repair of drinking water systems,

wastewater treatment facilities, sanitary or storm sewer

systems, solid waste disposal and separation systems, and

bridges. Loans, though available, have never been used.

MT Grants DW,WW Community Development

Block Grant (CDBG)

Program—Housing and

Public Facilities

To help communities with a population less than 50,000 meet

their greatest community development needs. All projects must

principally benefit low and moderate income persons. The basic

categories of local community development projects are: (a)

economic development, (b) housing, (c) public facilities, (d)

planning grants. MDOC administers the program. Public

facilities projects can include conventional community facilities

such as water, sewer, and solid waste. Projects can also

include those designed to principally serve low and moderate

income persons (i.e., head start centers, mental health centers).

The program is a federally funded competitive grant program.
Appendix II: Detailed Information on

State-Sponsored Programs for Drinking Water

and Wastewater Infrastructure

Page 31 GAO-02-134 Financial Assistance for Water Infrastructure

State

Form(s) of

assistance

Targeted

system(s) Program name Purpose

NE Grants WW Small Town Matching

Grants

To provide small towns with populations of 800 or less with a

grant up to 50 percent of the project cost in conjunction with a

CWSRF loan.

NC Grants WW Unsewered Communities

Grant Program

To assist units of local government with no wastewater

collection or treatment systems. Applicant must demonstrate a

critical public health or environmental threat. Additional eligibility

criteria apply. Funding covers 90 percent of project cost up to

$3 million.

NC Grants/loans DW,WW N.C. Revolving Loan and

Grant Program

To provide low-interest loans and grants to qualifying

applicants to address water and wastewater infrastructure

needs.

NC Grants DW,WW Supplemental Grants

Program

To provide up to $400,000 for units of local government for the

construction of water or wastewater projects. Applicant must

demonstrate a critical public health, environmental, or economic

development need. Funding can be used as the local match to

other state/federal programs.

NC Grants DW,WW Capacity Building Grant

Program

To provide up to $40,000 for units of local government for the

preliminary planning of water and/or wastewater systems.

Projects might include preliminary engineering reports, capital

improvement plans, feasibility studies, sewer/water rate studies.

Applicant must demonstrate a critical environmental, public

health, or economic development need.

ND Grants/loans DW Water Supply Development To assist water supply systems in addressing water quantity and

quality problems.

NH Grants WW Wastewater State Aid Grant

Program

To provide 20 percent to 30 percent grants in the form of loan

subsidies for wastewater infrastructure projects.

NH Grants DW State Drinking Water

Filtration Grant Program

To help public water systems comply with the surface water

treatment rules of the federal safe drinking water act of 1986.

NJ Grants WW CSO Program To fund planning and design of project to eliminate combined

sewer overflow problems

NJ Grants/loans DW,WW Pinelands Program To accomodate existing and future needs in the 23 designated

Pinelands Regional Growth Areas.

NJ Loans DW Safe Drinking Water

Program (Water Supply

Bond Loan Program)

To fund drinking water projects. The SRF program has replaced

this program. Loans made through 2000 are the final loans from

the state program.

NM Grants DW,WW Special Appropriations

Program

To administer and provide construction. Oversight for projects

funded by legislative special appropriations.

NM Grants WW Colonias Waste Water

Construction Program

To provide funding for projects intended to construct or improve

wastewater treatment and disposal in the Colonias communities

of New Mexico.

NM Grants/loans DW,WW Rural Infrastructure

Program

To provide low-interest loans and limited grant funds to build

water supply and wastewater systems for communities with

populations less than 10,000.

NM Grants DW,WW Water/

Wastewater Grant Fund

To assist local entities with construction or rehabilitation water

projects within a particular service area. Projects must receive

legislative authorization within 3 years of NMFA board approval.
Appendix II: Detailed Information on

State-Sponsored Programs for Drinking Water

and Wastewater Infrastructure

Page 32 GAO-02-134 Financial Assistance for Water Infrastructure

State

Form(s) of

assistance

Targeted

system(s) Program name Purpose

NM Loans None

specified

Public Project Revolving

Fund

To provide low-cost, low-interest rate loans to local government

entities for infrastructure and capital equipment purchases.

NV Grants DW AB198 Grant Program To provide grants to public purveyors of water to pay for the

costs of capital improvements to publicly owned community

water systems and publicly owned nontransient water systems,

as required or made necessary by the state health board, or

made necessary by the Safe Drinking Water Act. Funds are

available only to communities of less than 6,000 residents.

OH Loans DW,WW Village Capital Improvement

Fund (VCIF)

To help villages finance preliminary engineering plans, detailed

engineering plans, feasibility studies, and legal costs incurred

for planning phases of wastewater and/or public drinking water

facilities. VCIF is a partially interest-free loan program.

OH Loans DW,WW Ohio Water and Sewer

Rotary Commission

To provide no-interest loans to pay that portion of the cost

of a sewer or drinking water line extension project, which

otherwise would have been paid by assessments on agricultural

land.

OH Loans DW,WW Ohio Water Development

Authority

To provide loans to local government agencies to build the

wastewater systems, drinking water systems, and solid waste

disposal facilities needed to comply with water pollution control

standards.

OH Grants/loans/

debt service

subsidies

DW,WW Ohio Public Works

Commission

To help municipal corporations, counties, townships, and

regional sewer/water districts maintain operations and adequate

wastewater, drinking water, and solid waste disposal facilities.

OH Loans DW Drinking Water Emergency

Loan Fund (DWELF)

To provide emergency loans to owners or operators of public

drinking water systems for emergency remediation of a "threat

of contamination"—anything that prevents a public water system

from supplying adequate quantities of safe, potable water to

existing users.

OK Grants DW,WW Emergency Grant Program To provide financial assistance for a wastewater or drinking

water emergency, which is defined as a life, health, or propertythreatening situation. There is a maximum of $100,000 per

project per applicant during any fiscal year. Each appliciant is

subjected to a "grant priority evaluation policy" that considers

the following: nature of the emergency, water and sewer rates,

monthly debt payment, local contribution, median household

income, and benefit to other systems, among others.

OK Grants DW,WW Contract Financial

Assistance

To fund special drinking water and wastewater infrastructure

projects that are approved by the legislature.

OK Grants DW,WW Rural Economic Action Plan

"REAP"

To assist communities of 7,000 or less with their wastewater or

drinking water systems. Maximum amount is $150,000.

Applicants are subjected to a specific “REAP grant priority

evaluation policy.” Criteria considered include: population,

water and sewer rates, indebtedness per customer, median

household income, applicant's ability to finance the project,

amount of grant requested, previous grant assistance, and

enforcement orders.
Appendix II: Detailed Information on

State-Sponsored Programs for Drinking Water

and Wastewater Infrastructure

Page 33 GAO-02-134 Financial Assistance for Water Infrastructure

State

Form(s) of

assistance

Targeted

system(s) Program name Purpose

OK Loans (from

bonds)

DW,WW Financial Assistance Loan

Program

To assist communities with drinking water and wastewater

infrastructure. Funds provided for this program come from

bonds.

OR Loans WW Sewer Assessment Deferral

Loan Program (SADLP)

To provide financial assistance to property owners who would

experience financial hardship as a result of the mandatory

connection to the public sewer system. Property owners acquire

loans through local communities.

OR Grants/loans/

bonds

DW/WW Water Fund To provide financing to construct and improve public drinking

water systems and public wastewater collection systems.

OR Grants/loans/

bonds

DW/WW

(and other

projects)

Special Public Works Fund To provide financial assistance to municipalities for constructing,

improving, and repairing those facilities that are essential for

supporting economic activity which stimulates and promotes

employment opportunities in Oregon.

PA Loans DW,WW DCED Infrastructure

Development Program

To fund drinking, waste, and stormwater system construction.

PA Loans DW,WW DCED Local Government

Capital Projects Loan

Program

To fund drinking, waste, and storm water system construction.

PA Loans DW,WW DCED PA Economic

Development Financing

Authority

To fund drinking, waste, and stormwater system construction.

PA Grants WW DEP Act 339 Sewage

Treatment Plant Operation

Subsidy Grants

To fund wastewater system construction.

PA Grants/loans DW,WW Pennvest Construction

Loan Program

To fund drinking, waste, and stormwater system construction.

PA Grants/Loans DW,WW Pennvest Advance Funding

Program

To fund drinking, waste, and stormwater system construction.

RI Loans WW Rhode Island Water

Pollution Control Revolving

Fund

To finance projects not meeting the requirements of federal

programs.

SC Loans DW,WW South Carolina

Infrastructure Revolving

Fund (SIRF)

To construct publicly owned water and sewer facilities.

SC Grants DW,WW South Carolina Budget &

Control Board Grant

Program

To provide assistance for water and sewer related purposes.

SC Grants DW,WW

(and other

needs)

Environmental Emergency

Fund

To provide assistance during environmental emergencies that

require immediate and comprehensive response from the state

to deter pollution and protect public health.

SD Grants/loans/

technical

DW,WW State Water Resources

Management System

To provide state financial and technical assistance to large,

costly water-related projects that need significant state cost

share participation and most likely require significant federal

financing and federal authorization. Projects are designated for

this program through a legislative process.

SD Grants/loans DW,WW Consolidated Water

Facilities Construction

Program

To assist a wide variety of drinking water, wastewater, storm

water, groundwater protection, and watershed restoration

projects. Most of the assistance is in the form of grants.

TN Loans DW,WW Tennesee Local

Development Authority

(TLDA) Loan Program

To assist local governments with their water, wastewater, and

solid waste projects.
Appendix II: Detailed Information on

State-Sponsored Programs for Drinking Water

and Wastewater Infrastructure

Page 34 GAO-02-134 Financial Assistance for Water Infrastructure

State

Form(s) of

assistance

Targeted

system(s) Program name Purpose

TN Loans DW,WW Utility Relocation Loan

Program (URLP)

To assist cities and utility districts that must relocate utilities due

to Tennessee Department of Transportation (TDOT) road

projects.

TN Grants/loans DW,WW Tennessee Industrial

Infrastructure Program

(TIIP)

To assist local governments and businesses with infrastructure

improvements and job-specific training.

TX Grants/loans DW,WW Economically Distressed

Areas Program

To develop adequate water supply and wastewater facilities in

certain areas without such facilities or where the financial

resources of the residents were inadequate to meet those

needs. The program can fund the construction, acquisition, or

improvements to water supply and wastewater collection and

treatment works, including all necessary engineering work. The

program will not fund ongoing operation and maintenance

expenses, and applies only to areas of the state meeting the

definition of an "economically distressed area," primarily in

counties along the Texas/Mexico border.

TX Loans (funds

come from

bonds; state

partial owner)

DW,WW State Participation Program To encourage the optional development of major regional water

supply, wastewater, or flood control projects where local

interests could not afford such projects at the time the

assistance is provided. The state provides the assistance by

financing and owning up to 50 percent of the regional facilities

until such time as sufficient growth occurs for the state's interest

to be bought out by the regional participants. Funds for the

program come from the sale of general obligation bonds for

which the legislature has pledged to pay all or part through

draws on general revenue funds while the state retains partial

ownership of the facilities. Recipients of assistance are required

to purchase the state's interest when they begin using any

portion of the project capacity owned by the state.

TX Loans/bonds DW,WW Water Development Fund To help communities develop water supplies. The program has

evolved over the years, adding additional authority to fund

wastewater and flood control projects. Current development

fund loans are made to political subdivisions for water supply,

water pollution control, and flood control projects. Recent

assistance for these programs has averaged approximately

$70 million per year. In addition, approximately $25 million

per year of these general obligation bond funds is used to

supply the state match for the CWSRF and DWSRF

programs.

UT Loans DW Board of Water Resources To provide low-cost financing to develop Utah's water

resources.

UT Grants/loans/

interest rate

buydown

agreements

WW Water Quality Project

Assistance Program

To help political subdivisions of the state fund water quality

projects.

UT Grants/loans DW/WW

and other

governmen

tal needs

Permanent Community

Impact Fund

To assist state agencies or subdivisions that are or may be

socially or economically affected, directly or indirectly, by

mineral lease development on federal lands.
Appendix II: Detailed Information on

State-Sponsored Programs for Drinking Water

and Wastewater Infrastructure

Page 35 GAO-02-134 Financial Assistance for Water Infrastructure

State

Form(s) of

assistance

Targeted

system(s) Program name Purpose

UT Grants/loans DW Drinking Water Financial

Assistance

To provide low-cost financing for public drinking water system

infrastructure projects.

VA Grants WW State Combined Sewer

Overflow (CSO) Grants

To help Virginia localities meet the local share requirement of

federal earmark grants.

VA Loans/bonds DW,WW Virginia Resource

Authority—Bond Program

To help local governments fund wastewater and drinking water

projects

VA Grants WW Water Quality Improvement

Fund—Point-Source

Pollution Control

To provide technical and financial assistance to local

governments and individuals to help them control point-source

pollution, primarily nitrogen and phosphorus.

VT Grants DW Vermont Water Supply

Grant Program

To provide financial assistance for needed improvements to

publicly owned water systems. 35percent of the grants were

provided for new or improved source, storage, treatment, or

transmission main facilities.

VT Grants WW Vermont Pollution

Abatement/Control Grant

Program

To abate (1) direct discharges of untreated or improperly treated

domestic wastes (35 percent state grant; 65 percent SRF); (2)

combined server/wet weather overflow (25 percent state grant;

50 percent SRF loan; 25 percent other); (3) phosphorus

removal; and (4) sludge and septage (50 percent state grant;

50 percent SRF).

WA Loans DW,WW Public Works Trust Fund

Construction Loan Program

To provide low-interest loans to local governments for the repair,

replacement, and rehabilitation of infrastructure.

WA Grants DW Referendum 38 To assist public water system utilities in upgrading existing

systems and keeping pace with the increasing demands placed

upon them. Program is now being phased out.

WA Grants/loans WW Referendum 26 To provide financial assistance for the acquisition, construction,

and improvement of public waste facilities. Program is now

being phased out.

WA Grants/loans WW Centennial Clean Water

Fund

To assist local governments and tribes with the planning,

design, acquisition, construction, and improvement of water

pollution control facilities and related activities. Program will

continue until 2021.

WA Grants/loans WW Referendum 39 To provide for the planning, design, acquisition, construction,

and improvement of public waste disposal and management

facilities. Program is now being phased out.

WI Grants/loans WW Clean Water Fund Program To construct wastewater infrastructure.

WI Grants DW Municipal Clean Drinking

Water Grant Program

To correct violations of the drinking water standards.

WV Grants/loans DW,WW Loan and Grant Program To construct wastewater and water facilities for public utilities.

WY Grants/loans DW,WW Federal Royalty Capital

Construction Account

Grants and Joint Powers

Act Loans

To fund public service facility owned by the applicant and

available for use by the general public, including water and

sewer projects, storm drainage projects, street and road

projects, solid waste disposal projects, acquisition of emergency

vehicles public administration buildings, health care facilities,

senior citizens’ centers, jail and detention facilities, and facilities

needed to provide services to the disabled and similar facilities

as authorized by the Board.
Appendix III: Questions in State Survey

Instrument

Page 36 GAO-02-134 Financial Assistance for Water Infrastructure

Appendix III: Questions in State Survey

Instrument

Note: This appendix

includes the material

provided to survey

participants including the

questions and

instructions for answering

them.
Appendix III: Questions in State Survey

Instrument

Page 37 GAO-02-134 Financial Assistance for Water Infrastructure
Appendix III: Questions in State Survey

Instrument

Page 38 GAO-02-134 Financial Assistance for Water Infrastructure
Appendix III: Questions in State Survey

Instrument

Page 39 GAO-02-134 Financial Assistance for Water Infrastructure
Appendix III: Questions in State Survey

Instrument

Page 40 GAO-02-134 Financial Assistance for Water Infrastructure
Appendix III: Questions in State Survey

Instrument

Page 41 GAO-02-134 Financial Assistance for Water Infrastructure
Appendix IV: GAO Contact and Staff

Acknowledgments

Page 42 GAO-02-134 Financial Assistance for Water Infrastructure

Ellen Crocker (617) 565-7469

Key contributors to this report include Terri Dee, Les Mahagan, Diane

Raynes, Laura Shumway, and Lisa Turner. Also making significant

contributions were Christine Bonham, June Foster, Karen Keegan, and

Jonathan McMurray.

Appendix IV: GAO Contact and Staff

Acknowledgments

GAO Contact

Staff

Acknowledgments

(360029)
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